Liv-ex: The Global Marketplace For The Wine Trade
Take a peek into the world of Liv-ex : The smartest way to price, source, and sell wine.
Technology is seeping into all the cracks and curves of the world, and the world of wine is no exception. Technology is slowly climbing the grapevine and finding its way in the wine industry.
A large part of the wine industry is buying, selling, and logistics. What would happen if that could all be taken care of by a click of a button? That’s what Liv-ex does in a nutshell. Liv-ex is the global marketplace for the wine trade, making wine trade easier than ever with the help of the internet and technology.
IBWSS SF, Anna sat down with James Miles, Chairman, Managing Director, and Co-Founder of Liv-ex as he shared his journey towards building Liv-ex and delved into what he thinks wine and tech is going to be eventually.
Could you tell us a little bit about Liv-ex as a company
Liv-ex is an acronym for the London International Vintners Exchange. I set up the business in 2000 with a friend from work, Justin Gibbs. I was an equities analyst and he was a salesman for the French bank BNP Paribas. Our idea was to build a B-2-B stock market for the wine industry, thinking that the market for wine was opaque, inefficient and at times risky. We believed the Internet provided an opportunity to make the wine market more transparent, efficient and safe. We had seen the impact that electronic exchanges had in financial markets and believed that the Internet provided a similar opportunity to transform professional wine trading.
What exactly is Liv-ex and how does it work?
Liv-ex has become the global marketplace for the wine trade. We have more than 450 members in 42 countries, from ambitious start-ups to established merchants. We supply them with the data, trading and logistics services that they need to price, source and sell wine more efficiently. Our marketplace and related services are available online from our portal at www.Liv-ex.com or via API if our customers want to automate any element of our service or make them available to their own customers.
What was the inspiration behind Liv-ex?
Justin and I had collected and traded a bit of wine and became completely fascinated by the market. We were struck by the similarities between trading wine and trading stocks. Many of the problems around price discovery, standardization and settlement, which had been solved in financial markets, were very evident in wine. Like stocks, wine is a highly fragmented market, by both players and products. This fragmentation creates many inefficiencies. The Internet seemed to provide an opportunity to bring all of these disparate players and products onto a single platform, increasing transparency and liquidity and lowering costs. While we had no background in wine, we did understand what efficient markets looked like and believed that we could use this experience to transform the way the wine market worked.
How did you get started with the whole process?
In late 1999, I got a prototype platform built in Hong Kong, and went to see all the leading merchants in the UK. At the time, my former employer Paribas was in the process of being taken over by BNP. Eventually, Justin and I were made redundant in the process. We used our generous redundancy payment to get Liv-ex started. In July 2000, we managed to persuade 10 London based merchants to give the new platform a go and began trading. Our big early innovation was to create a contract for trading wine, which standardized the unit of trade, setting condition, delivery and payment terms. In a market, where there were no standards, this appealed to early adopters and introduced many efficiencies to the trading process.
What are some of the challenges you faced while building Liv-ex?
Liv-ex is a highly networked business. It is only of any value if it has users. Getting early users to sign up and see the value of using the platform was challenging. For the first six months, we provided the service for free which allowed us to build some critical mass quite quickly. Our other big challenge was that in 2000, most of our customers were still accessing the Internet on dial-up connections. This meant the web and our first platform were extremely slow. It took 2 minutes for our landing page to load! As a result, I think Justin and I were the only users of our platform in the early years. We effectively built our network using the telephone, email and by sending out a big paper catalog of wine prices. Equally by mid-2000, it was clear that the bubble for “dot com” businesses had burst and raised new finance became extremely difficult. We survived day to day by keeping costs extremely low and by raising funds from friends and family.
What made you think “yes, this is going to work”?
There wasn’t any single eureka moment. Like many people setting up a new business we had no choice but to believe it was going to work. We had everything invested in the project (our money, careers and sanity!), failure just wasn’t an option. At the time, most other people thought we were mad and success was iterative as we continued to add new members to our network one at a time. Looking back at the big moment for the business was actually the adoption of broadband in the UK, which took off in 2003-4. This allowed us to migrate customers and our trade online and made Liv-ex membership substantially more attractive as the network effects started to kick in. The difficult environment in the early noughties had also killed off our early competition, which made concentrating trade in the platform much easier. Between 2004 and 2011 our revenues grew nearly 20-fold.
What is the future for Liv-ex?
We want to continue to position ourselves right at the heart of global trade and still believe there is a substantial opportunity to expand our network. Our business has changed dramatically in the last10 years. We started as a predominantly transactional business, facilitating trade in cru classe Bordeaux. Bordeaux was 97% of our trade by value and commissions from transactions accounted for 75% of our income. Today the business is much more diverse. Bordeaux accounts for less than half of our trade by value. We now facilitate trade in more than 15,000 wines on our platform from all the major wine regions of the world. All of these are available in real-time under a predetermined contract providing considerable assurance and efficiency around the condition, delivery, and payment. This trade is supported by a comprehensive logistics network for merchants in Europe, US and Asia. Our data is also trusted by merchants to support trading decisions and to value wine. We have built up a database of more than 100 million price points across 240,000 wines. By expanding our product base and the number of wines we offer we believe we are becoming more relevant to a larger universe of wine trade participants.
Where do you see Tech and Wine in the future?
Liv-ex started, like many web-based businesses at the turn of the century, as an online portal. We continue to support and invest in this application, but we believe that the future will be much more connected and automated. Customers are increasingly using LWIN (the Liv-ex Wine Identification Number) and our family of APIs to connect their business systems and websites directly to our platform. This allows them to check prices, place orders and organise logistics seamlessly and in real-time from within their own systems or websites, without needing to visit the Liv-ex portal or rekey prices or transactions across multiple business systems. This results in big efficiencies and new opportunities for retailers to enrich their customer’s experience with better information and increased choice or for wholesalers/ importers to expand the market for their wines, without having to invest in distribution, working capital or expand their workforce. We believe increased automation and connectivity will make wine at all levels more accessible to a larger audience. This will benefit both our customers and wine lovers everywhere.